EXTENDED RANGE FORECAST OF ATLANTIC SEASONAL HURRICANE ACTIVITY AND U.S. LANDFALL STRIKE PROBABILITY FOR 2006

By Philip J. Klotzbach and William M. Gray

"Information obtained through May 2006 continues to indicate that the 2006 Atlantic hurricane season will be much more active than the average 1950-2000 season.  We estimate that 2006 will have about 9 hurricanes (average is 5.9), 17 named storms (average is 9.6), 85 named storm days (average is 49.1), 45 hurricane days (average is 24.5), 5 intense (Category 3-4-5) hurricanes (average is 2.3) and 13 intense hurricane days (average is 5.0).  The probability of U.S. major hurricane landfall is estimated to be about 60 percent above the long-period average."

The order of the authorship of this year's forecast has been reversed from Gray and Klotzbach to Klotzbach and Gray. After 22 years of making these forecasts, Dr Gray is stepping back and letting Phil Klotzbach assume the primary responsibility for the seasonal, monthly and landfall probability forecasts.  According to this year's report, Klotzbach is now devoting more time to the improvement of the forecasts than Dr. Gray, who is now devoting more of his time to the global warming issue.

"They've been brainwashing us for 20 years," Gray says. "Starting with the nuclear winter and now with the global warming. This scare will also run its course. In 15-20 years, we'll look back and see what a hoax this was."

Dr. Gray is perhaps the world's foremost hurricane expert. His Tropical Storm Forecast sets the standard. Yet, his criticism of the global warming "hoax" makes him an outcast.

Gray acknowledges that we've had some warming the past 30 years. "I don't question that," he explains. "And humans might have caused a very slight amount of this warming. Very slight. But this warming trend is not going to keep on going. My belief is that three, four years from now, the globe will start to cool again, as it did from the middle '40s to the middle '70s."

Of course one of the metrics that proponents of the meme "global warming is a big man made catastrophe" keep citing is the increase in the number and intensity of Atlantic hurricanes in the last fews years. According to Al Gore, storms like last year's Katrina are the direct result of human activity and are indicative of a long term trend that will destroy the earth as we know it. Cooler heads, and more scientifically sound minds, like Dr Gray's, believe that the recent increase in Atlantic storm activity is part of a much shorter term and quite natural cycle (and a cycle that has occurred many times before).

What seems most important right now is that we enter into a proper, well informed debate about what is really going on - free from the politically motivated scaremongering of the left and the environmentalist lobby. Actually debating the issue before we set public policy may be inconvenient for Al Gore and his private jet chaterer, but it is crucial for the rest of the world.

Barbados saw an increase in the number of licences issued to companies in both the international business and financial services sector last year, according to a report by the country's central bank.

The central bank's economic review noted that 428 new business licences were issued last year, 67 more than were granted in 2004. Some 372 licences were granted to international business companies, an increase of 11 over the previous year.

Forty-two licences were approved for societies with restricted liability, 22 fewer than the number permitted in 2004. Additionally, approval was granted for 14 new Exempt companies – 11 for exempt insurance and 3 for exempt management firms. No new licences were offered to offshore banks.

Jamaica, Barbados, Belize, Guyana, Suriname and Trinidad and Tobago, the six CARICOM member states, signed a declaration on 30 January signaling the formal launch of the CARICOM Single Market (CSM).

Member countries of the Organization of Eastern Caribbean States, namely: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines also signed declarations signaling their intent to join the CSM by the end of June 2006.

The launch of the CSM is intended to lead to the implementation of a CARICOM Single Market and Economy (CSME), by 2008. The CSME seeks to go further than simply establishing a Free Trade Area. The CSME will involve a single currency and the harmonisation of economic policy. It seeks to establish a Single Market and Economy, which will ultimately mean not only the removal of tariffs and special treatment amongst members, but also the harmonization of tax and social regimes. To achieve this goal, CARICOM has earmarked US$70 million to be spent over a 10-year period.

With the gradual removal of traditional preferential trading arrangements with the UK and the EU under the current World Trade Organisation regime, the CSME is seen as vital to the survival of the Caribbean market.

Over 130 representatives of 55 governments, the Commonwealth Secretariat and the European Commission met on 15-16 November 2005 in Melbourne, Australia to review progress towards the OECD’s stated objective of transparency and effective exchange of information for tax purposes (the so called “level playing field based on high standards”). And what an extraordinary gathering it was, with tiny islands like Vanuatu and Niue sitting down at the same table as the US, the EU member states, and Canada!

The two day discussions, which were based upon the review of the legal and administrative frameworks on transparency and exchange of information in tax matters currently in place in over 80 countries, showed that a global level playing field in the areas of transparency and effective exchange of information in tax matters is gradually developing. However, the Forum’s discussions identified a number of areas where further progress needs to be made. The Forum’s review will be published as a formal report in 2006.

For a fuller article on the Forum and its outcome click here

The Financial Action Task Force against money laundering announced that it has removed Nauru from its blacklist and will end its five year monitoring of the Bahamas. However, it has kept Myanmar and Nigeria on the list as their financial system reforms to date have not gone far enough.

The FATF has 31 member countries, plus the European Union and the Gulf Cooperation Council

In June of 2000, the FATF listed the Bahamas and Nauru among 13 other offshore financial centres which it identified as Non-Cooperative Countries and Territories. In the case of Nauru, the removal from that list follows the complete closure of the offshore financial centre activities that were causing concern. In the case of the Bahamas, the country subsequently implemented a series of legislative and institutional measures to improve the regulatory regime and was removed from that Blacklist in 2001, however, the FATF has continued to closely monitor the jurisdiction until this month.

The Government of The Bahamas will maintain the vigilant position that we have and will not relax in any respect the pace of regulatory cooperation," Minister Sears assured. "This will require that we constantly review our process and that we improve and increase our capacity. It also means that we will have to actively engage the international community…because we are talking about an evolving standard of international cooperation. This requires that we participate and through our participation influence these evolving standards so that we have an ownership of the global norms."

Bloomberg reports that Canada will spend C$30 million to build 11 tax centers and is hiring more auditors in a bid to crack down on tax evasion from offshore accounts. The government is trying to crack down on individuals or companies that shift money abroad to evade paying taxes.

Last year, the agency reassessed about C$1.1 billion in taxes due on international transactions. Better auditing could boost government revenue and add to the expected C$6-8 billion budget surplus for the fiscal year ending in March 2006. In one practice uncovered last year, taxpayers trying to avoid capital-gains levies from the sale of private corporations diverted the proceeds to spousal trusts in Barbados. As a result of its audit, the government reassessed 72 people for C$254 million.

The US Embassy and the US Internal Revenue Service (IRS) has warned non-resident individuals in Barbados and the Eastern Caribbean who receive income from a source that they may be targeted in an identity theft scheme. The scam, which surfaced last year in the region and has appeared again recently, uses phony IRS correspondence and an altered IRS form to trick people into disclosing their personal and financial data, which is then used to steal their identity and financial assets.

The IRS warns that people should not respond to this request. Taxpayers should be very wary of strangers trying to obtain sensitive personal information, whether in person, over the phone, through the mail or online.

As part of the scam, an altered IRS Form W-8BEN is sent, with correspondence purportedly from the IRS, to non-U.S. residents who may have income from the US. The correspondence claims the recipient will be taxed unless they submit the requested personal and financial data.

The real IRS form is used to determine whether a non-citizen is subject to withholding tax. It does not ask for personal information except, in some cases, a Social Security or IRS-Generated Taxpayer Identification Number. In addition, the recipient's financial institution, not the IRS, sends out the genuine form.

I recently saw a similar sort of phishing letter, and it looked very convincing and official - Beware!

New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills has now filed a civil suit in Manhattan's  Supreme Court against AIG and former executives. In the complaint it is alleged that Mike Murphy, a longtime confidante of ousted AIG head Maurice ‘Hank' Greenberg, ordered records at the company's Bermuda-based operations to be deleted - allegations refuted by his legal counsel. See Bermuda posts for more on Mike Murphy.

The complaint names the following offshore entities: a Barbados-based shell company - CAPCO, Bermuda based subsidiary, American International Reinsurance Company, (AIRCo), and two "affiliate" reinsurers - Bermuda-based Richmond Insurance and Barbados-based Union Excess. Only after Mr. Greenberg's ouster and heightened regulatory scrutiny did AIG admit to controlling Richmond and Union Excess.

Update: AIG filed its long-awaited 2004 annual report with the Securities and Exchange Commission at the end of May, restating financial results for 2000 through 2003 and adjusting the firm’s 2004 results. As part of the restatement, AIG cut shareholders’ equity at Dec. 31, 2004 by $2.26 billion, or 2.7 percent, to $80.61 billion, in line with an earlier estimate. This included an after-tax reduction of $1.19 billion for changes in estimates for the fourth quarter of 2004.

Revised calculations by the New York-based company lowered AIG’s profits by nearly $4 billion for the five years starting in 2000. The biggest of those changes came in 2004, with net income cut by $1.32 billion, or nearly 12 percent, to $9.73 billion from the $11.05 billion that had been reported on Feb. 9.

In its new filing with the SEC, AIG acknowledged accounting improprieties, including “improper or inappropriate transactions. It also said: “In many cases, these transactions or entries appear to have had the purpose of achieving an accounting result that would enhance measures believed to be important to the financial community and may have involved documentation that did not accurately reflect the true nature of the arrangements. In some instances, the filing said, the transactions “may also have involved misrepresentations to members of management, regulators and AIG's independent auditors.

Technically the expression "offshore" means "moving or directed away from the shore" as in the term "an offshore wind". In finance the expression is used to describe an arrangement that is located or based in a foreign country and therefore not subject to the laws of the jurisdiction in which you or your business is domiciled. (E.g., offshore bank account; offshore investment).

The concept of an "offshore jurisdiction" is commonly used in connection with financial transactions to describe the use of jurisdictions which are predominantly financial centres and which have enacted special legislation and/or tax regimes in order to attract financial services from other, mainly larger, countries. Generally these offshore financial centres are characterized by low or zero taxes on international business, liberal laws for the incorporation of international business corporations or other legal structures, and a lighter burden of regulation and supervision.

Many offshore jurisdictions are small islands in the Atlantic, Indian or Pacific oceans. Given the extent of the British Empire in its hay day it is not surprising to find that many of these islands where once owned by the U.K.  Perhaps more surprising is the fact that most of the U.K.’s last remaining colonies - or "Overseas Territories" as we should now call them - are leading offshore financial centres, namely: Bermuda, BVI, Cayman Islands and Gibraltar.  Throw in the Crown Dependencies of Jersey, Guernsey and the Isle of Man, which are also all offshore financial centres, and we could claim that the City of London’s finest export to the world is "Offshore Financial Centres". LOL

William M. Gray and Philip J. Klotzbach have recently revised their annual forecast for likely hurricane activity in the Atlantic basin. They foresee an above-average hurricane season for the Atlantic in 2005. They also anticipate an above-average probability of US major hurricane landfall. They have adjusted their forecast upward from an early December forecast and state that they may further raise their prediction in later updates if they can be sure El Niño conditions will not develop this year. Grenada and the Cayman Islands were particularly badly hit in september last year by Hurricane Ivan. Bermuda was hit by Hurricane Fabian in 2003. By the numbers from their report:

"Information obtained through March 2005 indicates that the 2005 Atlantic hurricane season will be an active one. We estimate that 2005 will have about 7 hurricanes (average is 5.9), 13 named storms (average is 9.6), 65 named storm days (average is 49), 35 hurricane days (average is 24.5), 3 intense (category 3-4-5) hurricanes (average is 2.3) and 7 intense hurricane days (average is 5.0). We expect Atlantic basin Net Tropical Cyclone (NTC) activity in 2005 to be about 135 percent of the long-term average. The probability of U.S. major hurricane landfall is estimated to be 140 percent of the long-period average. We expect this year to continue the past-decade trend of above-average hurricane seasons."